Sunday, 14 June 2015

Daily News Mail - News of 10/06/2015

AC restaurants alone can levy service tax: Govt
  • The Ministry of Finance on June 9 clarified that only restaurants and eating places that have air-conditioning can charge service tax. And the tax will be levied on only 40 per cent of the amount charged.
  • “Restaurants, eating joints or messes which do not have air-conditioning or central air-heating in any part of the establishment are exempt from service tax. In other words, only air-conditioned or air-heated restaurants are required to pay service tax,” it said.
  • The effective tax rate, after the increase as of June 1 to 14 per cent, will be 5.6 per cent.
Licences of 4,470 NGOs cancelled
  • In another round of action against erring NGOs, the government has cancelled the licences of 4,470 such entities that surprisingly included a number of top universities, the Supreme Court Bar Association and Escorts Heart Institute, which bars them from receiving foreign funds.
  • The decision to cancel the registration of these entities under the Foreign Contribution Regulation Act has been taken by the Home Ministry after examination of their activities that allegedly include non-filing of annual returns and other anomalies.
  • All associations were given proper notice by the Foreigners Division of the Home Ministry with adequate time to reply before their FCRA licences were cancelled, official sources said.
  • Other prominent organisations whose FCRA licences were cancelled include Panjab University, Chandigarh, Gujarat National Law University, Gargi College, Delhi, Lady Irwin College Delhi, Vikram Sarabhai Foundation and Kabir floated by Delhi Deputy Chief Minister Manish Sisodia.
  • Licences of nearly 9,000 NGOs were cancelled in April last for alleged violation of the FCRA.
Some important Acts

Protection of Women from Domestic Violence Act 2005

Protection of Children from Sexual Offences Act (POCSO) 2012

  • The Protection of Children from Sexual Offences (POCSO) Act 2012 is applicable to the whole of India. The POCSO Act 2012 defines a child as any person below the age of 18 years and provides protection to all children under the age of 18 years from sexual abuse. It also intends to protect the child through all stages of judicial process and gives paramount importance to the principle of "best interest of the child".
  • Penetrative and aggravated(meaning of aggravate - बिगाड़ना, बढ़ाना; (of an offence) made more serious by attendant circumstances) penetrative sexual assault, sexual and aggravated sexual assault, sexual harassment, and using a child for pornographic purposes are the five offences against children that are covered by this act. This act envisages punishing even abetment(meaning of abetment - to encourage, support, or countenance by aid or approval, usually in wrongdoing) or an attempt to commit the offences defined in the act. It recognizes that the intent to commit an offence, even when unsuccessful needs to be penalized. The punishment for the attempt to commit is up to half the punishment prescribed for the commission of the offence.
  • This act suggests that any person, who has an apprehension that an offence is likely to be committed or has knowledge that an offence has been committed, has a mandatory obligation to report the matter i.e. media personnel, staff of hotel/ lodges, hospitals, clubs, studios, or photographic facilities. Failure to report attracts punishment with imprisonment of up to six months or fine or both. It is now mandatory for police to register an FIR in all cases of child abuse. A child's statement can be recorded even at the child's residence or a place of his choice and should be preferably done by a female police officer not below the rank of sub-inspector.
  • As per this act, the child's medical examination can be conducted even prior to registration of an FIR. This discretion is left up to the Investigation Officer (IO). The IO has to get the child medically examined in a government hospital or local hospital within 24 hours of receiving information about the offence. This is done with the consent of the child or parent or a competent person whom the child trusts and in their presence.
  • Child Welfare Committees (CWC) play a vital role under the POCSO Act, cases registered under this act need to be reported to the CWC within 24 hours of recording the complaint. The CWC should take into account the opinion of the child to decide on the case within three days and conclude whether the child should remain in an institution or be with the family. The CWC should nominate with the consent of the child parent / guardian / other person who the child trusts, a support person to assist the child during the investigation and trial of the case.
  • The State Commissions for Protection of Child Rights (SCPCR) has been empowered and with the responsibility of monitoring the implementation of the provisions of the POCSO Act 2012, to conduct inquiries and to report the activities undertaken under the POCSO Act 2012, in its annual report. The commission is also empowered to call for a report on any specific case of child sexual abuse falling within the jurisdiction of a CWC. The commission can also recommend interim relief, or make recommendations to the state government to effectively redress the matter.
  • The rules laid down in this act also had defined a criteria of awarding the compensations by the special court that includes loss of educational and employment opportunities along with disability, disease or pregnancy as the consequence of the abuse. This compensation would be awarded at the interim stage as well as after the trial ends.

Scheduled Caste and Scheduled Tribe (Prevention of Atrocities) Act, 1989
  • The Scheduled Castes and Tribes (Prevention of Atrocities) Act, 1989 an Act of the Parliament of India enacted to prevent atrocities against scheduled castes and scheduled tribes. The Act is popularly known as POA, the SC/ST Act, the Prevention of Atrocities Act, or simply the Atrocities Act.
  • Article 17 of Indian Constitution seeks to abolish 'untouchability' and to forbid all such practices. It is basically a "statement of principle" that needs to be made operational with the ostensible objective to remove humiliation and multifaceted harassments meted to the Dalits and to ensure their fundamental and socio-economic, political, and cultural rights.
  • This is to free Indian society from blind and irrational adherence to traditional beliefs and to establish a bias free society. For that, Untouchability (Offences) Act 1955 was enacted. However, lacunae and loopholes impelled the government to project a major overhaul of this legal instrument. From 1976 onwards the Act was revamped as the Protection of Civil Rights Act. Despite various measures adopted to improve the socio-economic conditions of the SCs and STs they remain vulnerable and are subject to various offences, indignities and humiliations and harassment. When they assert their rights and against the practice of Untouchability against them the vested interest try to cow them down and terrorize them. Atrocities against the SCs and STs, still continued.
  • The normal provisions of the existing laws like, the Protection of Civil Rights Act 1955 and Indian Penal Code have been found inadequate to check these atrocities continuing the gross indignities and offences against Scheduled Castes and Tribes. Recognizing these, the Parliament passed ‘Scheduled Caste and Scheduled Tribe (Prevention of Atrocities) Act’, 1989 & Rules, 1995.
  • Thus objectives of the Act clearly emphasize the intention of the Government to deliver justice to these communities through proactive efforts to enable them to live in society with dignity and self-esteem and without fear or violence or suppression from the dominant castes. The practice of untouchability, in its overt and covert form was made a cognizable and non compoundable offence, and strict punishment is provided for any such offence.
  • The SCs and STs (Prevention of Atrocities) Act, 1989 with stringent provisions (which extends to whole of India except the State of Jammu & Kasmhir) was enacted on 9 September 1989. Section 23(1) of the Act authorises the Central Government to frame rules for carrying out the purpose of the Act. Drawing power from this section, the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Rules of 1995 were framed. The rules for the Act were notified on 31 March 1995.
  • The purpose of the Act was to help the social inclusion of Dalits into Indian society, but the Act has failed to live up to its expectations admitted by the Union Minister for Home Affairs in parliament on 30 August 2010.
M.K. Sharma is ICICI Bank Chairman
  • ICICI Bank on June 9 appointed M. K. Sharma as the non-executive Chairman of the Board for a period of five years, in place of K. V. Kamath.
  • Mr. Kamath would shortly step down from the Board consequent to his nomination as the first President of the New Development Bank.
  • “The appointment of the new non-executive Chairman is subject to the prior approval of the Reserve Bank of India and would be effective July 1, 2015, or the date of receipt of RBI approval, whichever is later,” ICICI Bank stated in a press release.
  • Mr. Sharma is an independent director of several leading companies and has been a member of Government committee. He was an independent Director on the Board of ICICI Bank for eight years from 2003 to 2011.
RBI issues draft norms on rupee-linked bonds overseas
  • The Reserve Bank of India (RBI) on June 9 said that Indian corporates, eligible to raise external commercial borrowings (ECBs), are permitted to issue rupee- linked bonds overseas.
  • “Corporates which are, at present, permitted to access ECB, under the approval route, will require prior permission of the RBI to issue such bonds and those coming under the automatic route can do so without prior permission of the RBI,” the apex bank said.
  • The RBI said that amount and average maturity period of such bonds should be as per the existing ECB guidelines.
  • For dollar-Indian rupee conversion, the Reserve Bank's reference rate on date of issue would be applicable.
External Commercial Borrowings
Any money that has been borrowed from foreign sources for financing the commercial activities in India are called External Commercial Borrowings. The Government of India permits ECBs as a source of finance for Indian Corporates for expansion of existing capacity as well as for fresh investment. The ECBs are defined as money borrowed from foreign resources including the following: 
  • Commercial bank loans
  • Buyers’ credit and suppliers’ credit
  • Securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc.
  • Credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.
Objective of ECB 
  • Government permits the ECBs as an additional source of financing for expanding the existing capacity as well as for fresh investments. The ECB policy of the Government seeks to emphasize the priority of investing in the infrastructure and core sectors such as Power, telecom, Railways, Roads, Urban infrastructure etc. 
  • There is also emphasis on the need of capital for Small and Medium scale enterprises. 
How ECB is different from FDI?
ECB means any kind of funding other than Equity. If the foreign money is used to finance the Equity Capital, it would be termed as Foreign Direct Investment. The ECB should satisfy the ECB regulations stipulated by the Government or its agencies such as RBI. The Bonds, Credit notes, Asset Backed Securities, Mortgage Backed Securities or anything of that nature are included in ECB. Please note that the following are not included in the ECBs: 
  • Any Investment made towards core capital of an organization such as equity shares, convertible preference shares or convertible debentures. We should note here that those instruments which can be converted into equity are called convertible. The convertible instruments are covered under the FDI Policy. 
  • Any other direct capital is not allowed in ECB. 
Routes to Access ECB
External Commercial Borrowing in India can be accessed via two routes viz. Automatic Route and Approval Route.
General idea is that ECB for investment in industrial sector, infrastructure sector are allowed under Automatic Route. They do not require the approval of the Reserve Bank or the Government of India. For specific sectors such as export and import, the borrower has to take the explicit permission of the government before taking the loan. 

Benefits to Borrower
  • For corporates, the ECB funding helps in many purposes such as paying to suppliers in other countries etc that may not be available in India.
  • The cost of funds borrowed from external sources at times is cheaper than domestic funds. The borrower can diversify the investor base.
  • It opens the international market for the borrowers. ECBs from internationally recognised sources such as banks, export credit agencies, suppliers of Equipment, foreign collaborators, foreign equity holders, international capital markets etc. 
Impact & Implications on Economy
  • The  Government of India has a controlled policy on ECBs and via its policies, it would like to make companies use the ECB to primarily fund the infrastructure and SME sector of the economy.
  • The benefit for the economy is that the low cost international funds can improve inflow of more money in these sectors. Over the years, Indian companies have increasingly dependent on ECB. Indian companies want to get loans through ECB at lower cost and lower their cost of borrowing.
  • The External commercial borrowings increase the external debt of the country. That is why it has to be matched with growth of foreign exchange reserves in the country so as to maintain solvency.
  • Also increase in ECB is accompanied with increase in currency risk as there will be depreciation in rupee, which will lead to increased burden on the borrower as the value of the rupee depreciates. Thus, increased dependence on ECB is less favourable for borrowing country’s view. If ECBs are not controlled , there can be huge debt causing problems for economy.
Policy of the Government
  • India’s ECB policy seeks to keep an annual cap or ceiling on access to ECB, consistent with prudent debt management. The policy also seeks to give greater priority for projects in the infrastructure and core sectors such as Power, oil Exploration, Telecom, Railways, Roads & Bridges, Ports, Industrial Parks and Urban Infrastructure etc. and the export sector. 
  • Allowed companies are free to raise ECB from any internationally recognised source such as banks, export credit agencies; suppliers of equipment, foreign collaborators, foreign equity-holders, international capital markets etc. offers from unrecognised sources will not be entertained. 
Current Limits
  • The companies in manufacturing and infrastructure sector and having foreign exchange earnings can avail of external commercial borrowing ( ECB) for repayment of outstanding rupee loans towards capital expenditure and/or fresh Rupee capital expenditure under the approval route. The overall ceiling for such ECBs is $10 billion. 
  • For infrastructure sector companies, there is an overall ceiling of $ 20 billion. RBI has in September 2012, allowed companies to raise ECB up to a maximum period of 5 years for importing capital goods. Under the new norms, the trade credit should not be for a period of less than 15 months and also not in the nature of short-term roll-over finance.

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